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Thursday, May 17, 2018

Proprietary School Education

Originally Published November 06, 2009; Last Updated May 17, 2018; Last RepublishedMay 17, 2018:

It's probably too early to tell if the proprietary school does anything more than saddle our youngsters with a mountain of debt to enrich a few investors—but an initial look is not encouraging.

It's not too early to require transparent disclosures4, oversight, and reporting from our proprietary schools.

These data can be used to determine whether these schools, as a whole or individually are responding to market demand or creating market distortions5?

It's difficult to imagine what proprietary schools provide, beyond a mountain of student debt and a near useless education1 that our community colleges cannot better provide.
Our community college system, properly configured to respond to the needs of our population2 and nation is a superior substitute for proprietary schools3.

The data contained in this detailed report and appendixes make it clear that it is no longer "too early to tell" if our proprietary schools do anything but saddle our youngsters with a mountain of debt to enrich a few investors at our nation's expense.

More than half of the students enrolled in proprietary schools between 2008-09 left without a certificate, associate degree or bachelor degree, which on average cost $15.5K, $26.6K and $10.1K (respectively) more than a nonproprietary equivalent.

"...As a result of high tuition, students must take on significant student loan debt to attend school. When students withdraw, as hundreds of thousands do each year, they are left with high monthly payments but without a commensurate increase in earning power from new training and skills.

...The vast majority of the students left with student loan debt that may follow them throughout their lives, and can create a financial burden that is extremely difficult, and sometimes impossible, to escape.

...During the same period, the companies examined spent $4.2 billion on marketing and recruiting, or 22.7 percent of all revenue. Publicly traded companies operating for-profit colleges had an average profit margin of 19.7 percent, generated a total of $3.2 billion in pre-tax profit and paid an average of $7.3 million to their chief executive officers in 2009."--Senate Report, For Profit Higher Education--

The report's recommendation that private student debt be dischargable in bankruptcy must extend to public student debt, too.

It's unclear why our Congress has yet to enact legislation ensuring all student loan debt is entirely dischargable within a nominal bankruptcy proceeding. Perhaps they'e been overwhelmed unwinding the first and second wave of debt from bank recapitalization and restructure?

Stabilization of the student loan program does not require that we flog our insolvent retirees through bankruptcy proceedings. Nor does or should the present draconian bankruptcy provision require a petitioner to prove a "certainty of hopelessness" or "total incapacity" to change (i.e. death) before discharging their student loan debt.

Shame on the Obama administration for arguing such bizarre nonsense in a bankruptcy proceeding!

Kudos to the President for using his bully pulpit and limited authority to
highlight the need for affordable access to education and encourage an
intransigent Congress to act.

Access to very low or no cost education is not an elite
privilege, but a fundamental cost of continual development and maintenance of
our modern civil society structures (i.e promoting the welfare of our nation).

Unfortunately, some of our current congressional representatives seem to believe that the constitutional phrase "promote the general welfare [of our nation]" means perpetually promoting war and prison in perpetuity.

Loading our students up with massive debt differs little from private capital (new definition for old leverage buy-out; LBO) structuring a deal that sends a target into bankruptcy with crushing unserviceable debt, except unlike our students the target can routinely discharge its crushing debt and sometime recover its losses from those that structured the LBO.

Our college students should not be required to make the Hobson's choice between a lifetime of debt and a lifetime of disadvantaging ignorance!

It's unclear why our community colleges are not seamlessly integrated into the life-long educational needs of our citizenry—offering no cost classes responsive to local, regional and national vocational, professional and two-year degree requirements (scalable to some four-year degrees) on a 24/7/365 schedule8.

Investigating how Wall Street and a new breed of for-profit universities are transforming the way we think about college in America...

Why do any for profit markets exist for educating human beings? Are for profit markets for education a solution or deficiency? What are the costs to a society of operating private markets for human being education? Is producing a product or service for a market the same as educating a human being? What, if any human activity is not amenable to a market solution? Is education or learning an "efficient" activity? Are there ways to improve public not for profit education that will eliminate for profit education markets? Can private for profit and public not for profit education markets coexist? Should education ever be responsive to any markets (see is education efficient above)? Is private for profit education a substitute or complement to public not for profit education? Do universal national standards for measuring educational outcomes inform the private for profit and public not for profit education debate?

Most significantly, what are the costs to our historically beneficial capitalist system from misapplication or distortion of markets and market principles or solutions to great harm? Once, twice, three times, or more...

1. An early flashing warning light is that other colleges, schools and universities are not transferring units from many proprietary schools.
A second flashing warning light is that economic analysis indicates many graduating student's earning capacity, as a direct result of the education provided, will be inadequate to retire the incurred debt.

2. Some policymakers and educators still incorrectly think they must conform a population to their demands to disastrous results for our students, schools, and nation.
Meeting our population cum students "where they are" while ensuring a meaningful education has always been a challenge for both students and educators—just more acute today.

3. Proprietary school enrollment figures indicate that our community colleges may be deficient in responding to our students' needs.
On the other hand many of our community colleges are pursuing very diverse and innovative approaches to meet fast changing demands—near round-the-clock class schedules; adapting to the more mature students; remedial classes; accommodating mental, learning, and physical disabilities; aligning course curricula and degree requirements to meet our changing national objectives, rigorous university academics, and local labor markets (present and future).

5. The "subprime" mess reminds us of the trillions of dollar difference between creating market distortions and supplying market demand.
Some of our "capitalists" have difficulty distinguishing one from the other.

7. Those wanting additional details on the politics of perpetuating these proprietary schools will appreciate Suzanne Mettler's new book Degrees of Inequality.Telling a story of:

"... how the US political system today has become a polarized plutocracy, with a government that is fiercely divided and ineffective, with rare exceptions--aside from those instances in which powerful, wealthy industries manage tho unite lawmakers across the aisle in bipartisan support of government largesse directed toward them. In an age of rising economic inequality, American government has grown so polarized that most efforts to respond to public needs end in stalemate. Yet big money interests with political savvy yield the power to generate bipartisan support for political elites. In the case of the for-profits, such success has enabled them to divert funds intended for educational opportunity, using them instead to improve their bottom lines." @ pg 167